Virtual Asset Service Act Three-Reading Version Cheat Sheet: Stablecoins, Licenses, Penalties - 4 Key Points at a Glance

Taiwan's Legislative Yuan passed the third reading of the "Virtual Asset Service Act" on June 30, 2026. This article is a quick guide that provides a complete breakdown of all key points of the act, helping you understand details such as stablecoins, licenses, and penalties.

• Version Note: This article has been updated based on the version passed in the Legislative Yuan's third reading. There are several differences from the draft version approved by the Executive Yuan on April 8, 2026 (see details in each section). The bill passed its third reading on June 30, 2026, and has officially entered the implementation preparation phase.

Virtual Asset Service Act Passed Third Reading in Legislative Yuan: A Quick Guide at a Glance

Taiwan's cryptocurrency industry has finally entered an era of clear regulation! Following the initial draft announced by the Financial Supervisory Commission (FSC) last year, the Executive Yuan passed the amended draft of the "Virtual Asset Service Act" in early April this year and sent it to the Legislative Yuan for review. It completed its third reading on June 30 of the same year, aiming to improve the development and management of Taiwan's virtual asset business, protect the rights of traders, and promote fintech innovation.

The version passed in the Legislative Yuan's third reading made several adjustments to the Executive Yuan's version, including extending the transition period for businesses, relaxing the regulatory approach for token listings, refining conditions for sentence reduction for voluntary surrender, and adding an anti-fraud joint prevention mechanism. Based on the version passed in the Legislative Yuan's third reading, "Crypto City" has compiled the following 4 key points to help readers quickly understand.

Summary of the 4 Key Points of the Virtual Asset Service Act Draft

Key Point 1: Classification of Virtual Asset Service Providers and License Applications

The "Virtual Asset Service Act" clearly stipulates that virtual asset service providers must, according to their type, obtain permission from the competent authority and receive a license (permit) before they can operate. Those without permission and a license are prohibited from engaging in any virtual asset business.

Additionally, the bill explicitly states that businesses "cannot operate without joining a trade association," thereby enforcing industry self-regulation. Traditional financial institutions, after obtaining permission, may also "concurrently operate" virtual asset businesses and be exempted from certain regulations.

The FSC classifies virtual asset service providers into 7 categories:

• Virtual Asset Exchange Providers: Engage in the exchange of virtual assets for New Taiwan Dollars, foreign currencies, and currencies issued by Mainland China, Hong Kong, or Macau and related services, or the exchange of virtual assets for other virtual assets and related services.
• Virtual Asset Trading Platform Providers: Virtual asset exchange providers that operate a centralized trading market for virtual assets.
• Virtual Asset Transfer Providers: Engage in the transfer of virtual assets and related services, including services related to virtual asset payments.
• Virtual Asset Custody Providers: Engage in the custody or management of virtual assets or tools used to control virtual assets and related services.
• Virtual Asset Underwriting Providers: Engage in the issuance or sale of virtual assets and related services.
• Virtual Asset Lending Providers: Engage in receiving virtual assets with an agreement to return or deliver virtual assets of the same or higher quantity or value, and related services.
• Other Virtual Asset Service Providers: Engage in other virtual asset services approved by the competent authority.

Image Source: Crypto City Graphic Quick Guide to the Virtual Asset Service Act: Types of Virtual Asset Service Providers and Permits/Licenses

Application Deadline for Permits/Licenses

Regarding the transition period that businesses are most concerned about, the Legislative Yuan version has clearer regulations: Existing businesses that have already completed AML registration must submit an application within 12 months after the act comes into effect and obtain their permit/license within 21 months after it comes into effect. Those who fail to apply or do not pass by the deadline cannot continue operating. If necessary, they may apply to the competent authority for an extension of up to 3 months (limited to once).

• The Executive Yuan's version originally stipulated 9 months for application and 18 months for obtaining the license; the version passed in the Legislative Yuan's third reading adjusted this to 12/21 months and added a mechanism for a 3-month extension application.

Regulations for Foreign Virtual Asset Service Providers

As for foreign virtual asset service providers (e.g., foreign crypto exchanges), if they wish to establish a branch in Taiwan, they must obtain permission and a license from the competent authority and complete company or branch registration in Taiwan.

Key Point 2: Management Framework for Virtual Asset Service Providers

The FSC has also referenced regulations from the EU's MiCA and those of Japan, Singapore, etc., establishing strict norms for virtual asset service providers. "Crypto City" has compiled the key points below:

Total Liabilities

The total external liabilities of a virtual asset service provider must not exceed a specified multiple of its net worth; its total current liabilities must not exceed a specified ratio of its total current assets. However, this does not apply to financial institutions concurrently operating such businesses. The aforementioned multiples and ratios will be determined by the competent authority.

Internal Controls and Administrative Fines

Service providers must establish internal control systems and information security standards. If internal controls are poor, financial reports are not filed according to law, or the review process for listing/delisting is not properly implemented, they will face administrative fines between NT$300k and NT$6 million, which can be imposed repeatedly for continuous violations.

Custody of Client Assets

Assets held in custody by a virtual asset service provider for its clients must be kept separately from its own property in a manner prescribed by the competent authority. Client assets include the client's virtual assets, fiat currency, and other assets. Creditors of the virtual asset service provider cannot make any claims or exercise any other rights over the client assets held in custody by the provider.

In the event of bankruptcy, client assets do not belong to the bankruptcy estate (Note). Client assets cannot be used except upon client instruction, to offset fee debts according to law, or with permission from the competent authority. The property rights of client virtual assets held by a virtual asset custody provider belong to the client and cannot be transferred to the provider by agreement. They must not be commingled with the provider's own virtual assets for custody purposes.

• Note: Bankruptcy estate refers to all assets owned by the company before the conclusion of bankruptcy proceedings, including movable property, immovable property, property claims, etc., all of which belong to the bankruptcy estate.

Client Fiat Currency Deposit Accounts

A virtual asset service provider may, with the client's consent, deposit the fiat currency involved in its virtual asset business into a dedicated deposit account of the same currency held at a financial institution. It must place the deposited fiat currency in trust or obtain a full performance guarantee from a bank.

Periodic Audit Reports

Virtual asset service providers must periodically file and publish financial reports audited or reviewed by a certified public accountant (CPA). Virtual asset custody providers must establish regular reconciliation measures for client assets under custody, appoint a CPA to issue a report, and file and publish it with the competent authority.

Review of Virtual Asset Listings and Delistings

Virtual asset exchange providers must publicly announce the issuance documentation (whitepaper) for the virtual assets they offer for exchange. Generally, if a virtual asset does not have issuance documentation prepared and published in accordance with regulations set by the competent authority, the exchange provider cannot offer exchange services for that virtual asset.

Virtual asset trading platform providers must establish review standards and procedures for listing and delisting. They must report to the competent authority for recordation regarding the virtual assets for which they provide centralized trading market services before offering such services. Additionally, they must establish mechanisms to prevent unfair market trading and measures to detect abnormal price and volume alerts, among others.

• The version passed in the Legislative Yuan's third reading changed this to a "recordation system," which is somewhat less stringent than the Executive Yuan's version requiring "competent authority consent" (pre-approval system). It also added the obligation for trading platform providers to establish abnormal alert mechanisms.

Anti-Fraud Joint Prevention Mechanism (New in the Legislative Yuan's Third Reading Version)

The competent authority should assist judicial police agencies in requesting high-risk virtual asset address data from virtual asset service providers and supervise these providers in establishing a joint prevention notification mechanism with judicial police agencies. Upon receiving a notification from a judicial police agency, a virtual asset service provider must continuously monitor the reported virtual asset addresses. This is a new clause added in the version passed in the Legislative Yuan's third reading, imposing a legal obligation on service providers to cooperate with law enforcement.

Image Source: Crypto City Graphic Quick Guide to the Virtual Asset Service Act: Management Framework for Virtual Asset Service Providers

Key Point 3: Regulations for Issuing Stablecoins in Taiwan

If a business wishes to issue stablecoins within Taiwan, it must obtain permission from the competent authority, which will consult the Central Bank on the matter. The bill imposes very strict red lines on stablecoins:

1. Prohibition on Paying Interest and Yields: Stablecoin issuers must not pay any form of interest or yields and must issue and redeem stablecoins at face value. The current U.S. stablecoin regulation, the "GENIUS Act," also includes this requirement.
2. Reserve Requirements and Central Bank Penalties: Issuers must maintain sufficient reserve assets, kept separately. After deducting reserves required by Central Bank regulations, the remaining balance must be fully placed in a trust. If reserves are insufficient, the Central Bank will charge an interest penalty of "5% per annum" on the shortfall, calculated at the lowest accommodation rate. For severe violations, additional fines will be imposed.
3. Foreign Stablecoins: If a virtual asset service provider's services involve a stablecoin not issued in Taiwan, it may still be traded in Taiwan if the competent authority approves the transaction.

Key Point 4: 8 Categories of Penalties, Heavy Punishment for Fraud and Manipulation

The "Virtual Asset Service Act" imposes extremely heavy penalties for fraud, market manipulation, and other behaviors. The Legislative Yuan version significantly increased the practical enforcement mechanisms:

• Fraud or Manipulation Provisions: Imprisonment for 3 to 10 years, and/or a fine of NT$10 million to NT$200 million.
• Sentence Reduction for Voluntary Surrender: If the offender voluntarily surrenders after committing the crime and pays the full amount agreed upon in mediation or settlement with the victim within 6 months from the date of surrender, the sentence may be reduced or waived. If this leads to the identification of the founder or organizer of a criminal organization or the seizure of all criminal proceeds obtained by the organization, the sentence may be directly waived.
• Sentence Reduction for Confession During Investigation: Requires confession during the investigation and at each subsequent trial, and reaching a settlement within 6 months from the first confession during the prosecutor's investigation, for a possible sentence reduction. If this leads to the identification of the leader of a criminal organization, the sentence may be reduced or waived.
• Operating Without a License or Issuing Stablecoins Illegally: Imprisonment for up to 7 years, and/or a fine of up to NT$100 million.
• Illegally Using Client Assets: Responsible persons face imprisonment for up to 5 years, and/or a fine of up to NT$50 million.
• Corporate Joint Penalty Mechanism: If an employee commits offenses like unauthorized operation or illegal use of assets, the company (legal entity) will also be subject to equally high fines.
• Increased Commutation of Fine to Labor Service: If the fine is NT$50 million or more, the maximum period for commuting the fine to labor service is increased to 2 years; if it is NT$100 million or more, the maximum period is increased to 3 years.
• Forfeiture of Criminal Proceeds: Explicitly stipulates that criminal proceeds obtained by the offender or a third party shall be forfeited, except for amounts returned to victims. If the proceeds are virtual assets, they shall generally be returned or forfeited as virtual assets.
• False Statements, Concealment, and Misuse of Names: For false applications or failure to submit reports, imprisonment for up to 3 years or a fine of up to NT$2.4 million; for non-service providers using similar names, imprisonment for up to 1 year or a fine of up to NT$1.2 million.

The version passed in the Legislative Yuan's third reading refined the voluntary surrender provisions, distinguishing between "voluntary surrender" and "confession during investigation," and added a mechanism for potential sentence exemption if a criminal organization is uncovered, making incentives for combating organized crime clearer.

Image Source: Crypto City Graphic Quick Guide to the Virtual Asset Service Act: List of Penalties for Virtual Asset Service Providers

Controversy Surrounding the Virtual Asset Service Act: Can Protection and Innovation Be Balanced?

The FSC stated that given the successive enactments of virtual asset-related regulations in the United States, the European Union, Japan, South Korea, Hong Kong, and other regions, an international consensus on virtual asset regulation is gradually forming. Based on the need to improve the development of Taiwan's virtual asset business, protect investors, and balance fintech innovation, establishing a dedicated law is necessary.

Following the bill's passage through the third reading, heated discussions continue within the industry. Positive viewpoints consider the enactment of regulations beneficial for industry health; negative viewpoints argue that the rules are extremely strict and may stifle innovation. Notably, the bill also includes specific articles on "Innovation Experiments" and "International Cooperation," explicitly allowing businesses to apply for innovation experiments (regulatory sandbox) and authorizing the competent authority to engage in cross-border information exchange.

The third reading of the "Virtual Asset Service Act" signifies that Taiwan's cryptocurrency industry has officially moved from the frontier era to a regulated compliance era. Businesses will inevitably face a necessary period of adjustment.

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